The main currencies have been trading in narrow ranges amid a backdrop of cautious bullishness in global markets (on the view that the coronavirus and its impact will be temporary while the stimulus efforts by China will have a positive impact), though some Asian currencies have continued to tumble. One notable mover has been the Singapore dollar, which is down by nearly 1% on the day against the dollar, at new four-month lows, extending the losses seen over the last two weeks to 2.6%. Singapore's MAS stated that due to coronavirus-associated economic slowing there is sufficient room within the policy band to accommodate an easing of the Singapore dollar. Among the main currencies, USD-JPY turned modestly lower after yesterday posting a 12-day high at 109.54, making a low at 109.31. The pair remains comfortably above the four-week low seen last Friday at 108.30. EUR-JPY retraced about a third of the gain seen Tuesday in printing a low at 120.66. EUR-USD tested, but has so far not breached, yesterday's low at 1.1033. Cable settled in the lower 1.3000s, above Tuesday's six-week low at 1.2941, but remaining a good distance from last Friday's one-month peak at 1.3209. AUD-USD edged out a six-day high at 0.6745, extending gains seen yesterday after the RBA refrained from cutting interest rates, and posting what is the pair's first three consecutive day of gains of the year. USD-CAD has been buoyant, near 1.3300, but remaining below the two-month high seen on Monday at 1.3303. Oil prices have found a toehold after recent heavy declines amid expectations for OPEC to trim output quotas in response to the demand erosion that the coronavirus and measures to contain its spread have been causing.

[EUR, USD]EUR-USD tested, but has so far not breached, yesterday's low at 1.1033. The pair remains above the two-month low at 1.0992, which was seen last Wednesday. Recent declines in EUR-USD have in part been a reflection of the dollar having been outperforming the common currency in the context of rising risk aversion in global markets. The U.S. currency is registering as the strongest of the main currencies on the year-to-date, reflecting international demand for Treasuries (the dollar is up by 4.0% versus the Aussie dollar, which is the weakest, and is showing a 0.8% gain on the yen, which is the second strongest). Bigger picture, EUR-USD has been trending lower since early 2018, dropping from levels near 1.2500 and posting a 32-month low at 1.0879 in early October, the current nadir of the trend. Momentum has faded, however, with the Fed having backed out of its tightening phase after hiking rates three times last year. The central bank has since been engaged in capping the repo rate, and Fed funds futures are discounting about 82% odds for a 25 bp easing at the last FOMC meeting of the year in December.

[USD, JPY]USD-JPY turned modestly lower after yesterday posting a 12-day high at 109.54, making a low at 109.31. The pair remains comfortably above the four-week low seen last Friday at 108.30. EUR-JPY retraced about a third of the gain seen Tuesday in printing a low at 120.66. The price action comes amid a prevailing cautious bullishness in global markets, on the view that the coronavirus and its impact will be temporary while the stimulus efforts by China will have a positive impact. This, in turn, has seen safe haven assets and currencies, such as the Japanese currency, loose support. The coronavirus remains a concern that's hard to quantify, though there are narratives suspecting overreaction, as the death toll, which is now at 500 (up from 427 yesterday), and reported cases remain a tiny fraction of those metrics for "regular" flu so far in the northern hemisphere winter. As with flu, the vast majority of people having been afflicted with the coronavirus make a full recovery, though there are worries that the virus could mutate into something worse. The travel restrictions in Asia will regardless have an economic impact across China and Asia. Hyundai is reportedly stop production lines in South Korea this week due to supply chain disruptions in China. Ratings agency Moody's suggested that while the coronavirus outbreak will weigh on discretionary consumer spending on transport, retail, tourism, and entertainment, that the Chinese government still has the financial means to absorb the shock.

[GBP, USD]Cable settled in the lower 1.3000s, above Tuesday's six-week low at 1.2941, but remaining a good distance from last Friday's one-month peak at 1.3209. We retain a neutral-to-bearish view of the pound. UK Prime Minister Johnson on Monday, in a keynote speech, made clear that his government is not looking for close regulatory alignment with the EU, which is likely to keep the UK currency's upside in check. His embrace of an "Australian-style deal" as a possibility -- a cosy way of selling the possibility of a no-deal Brexit at the end of 2020 -- suggests that he has shifted the goalposts, having formerly pledged, during the recent election campaign, that there was "zero chance" for a no deal Brexit at the end of 2020. The EU's chief Brexit negotiator, Barnier, said that the EU was not looking for regulatory "alignment" from the UK, but warned that the EU "would be very demanding" with regarding to the "quality and credibility" of the "level playing field mechanism." This is a shot across the UK bows, signalling that there will be consequences if the UK attempts go the low-regulation, low tax (a la Singapore) route. The market view is that a no-deal Brexit, and the shift to trading on WTO terms that would entail, would be economically damaging to the UK.

[USD, CHF]The Swiss franc has been rallying strongly recently, last week hitting 3-month highs against the euro. The gains have been partly a product of safe-haven demand, and partly as a lasting consequence of the surprising decision by the U.S. to add Switzerland to its list of currency manipulators last month. The U.S. move seems a bit rich given the franc is a demonstrably chronically-overvalued currency in purchasing parity terms (as illustrated by the Economist's Big Mac index), though the Trump administration argues that Switzerland needs a more expansive fiscal policy.

[USD, CAD]USD-CAD has been buoyant, near 1.3300, but remaining below the two-month high seen on Monday at 1.3303. Oil prices have found a toehold after recent heavy declines (of over 20% in little more than a month) amid expectations for OPEC to trim output quotas in response to the demand erosion that the coronavirus and measures to contain its spread have been causing.